React > Respond > Regenerate
Last week I discussed the importance of having both a vision (what you want to do) and a plan (how you are going to do it) for your company. The crisis caused by the coronavirus may not have altered your vision, but it has really clobbered your plan; and if you didn’t have a plan going in, it’s forcing you to think about one now. I mentioned my hypothesis that we will move through three phases in this crisis: React, Respond and Regenerate. By definition React is unplanned but Respond is different. This is not the time to discuss strategy, but the right response to this crisis could accelerate you toward your plan to regenerate your business when the opportunity presents itself.
A big difference I note in having worked for the Fortune 500 is their emphasis on planning. A plan is much more than a budget; in fact, the budget is a result of the plan. Many people attach a low value to planning in an environment of uncertainty, but our plans have to deal with uncertainty even in the best of times. Given today’s uncertainty around the key aspects of your plan (customers, dollars per sale, loan proceeds, etc.) one goal is to reduce uncertainty by validating key assumptions as best you can, and by narrowing the time frame.
What makes a good plan now?
I recommend a 6-month plan focused on cash flow, which means taking your operating budget and factoring in the non-operational sources and uses of cash. If you are in a really volatile position, a 90-day plan is better. A good plan is driven by metrics such as customer demand, sales per transaction and then the people, processes and technology required to support. These metrics can be managed by your key people and can serve as leading indicators for your financial results; managing to month-end results means you are playing from behind. If you receive a COVID loan, are you going to spend it with the goal of obtaining forgiveness, or some other way that might jumpstart the regeneration of your business (which might turn the amount not forgiven into a 1% loan?) The takeaway from all this: you need a plan that both supports you now, and then propels you toward your vision.
There is much to talk about with respect to development of a dynamic plan. I’m going to host a virtual workshop next week to talk about my COVID-19 React > Respond > Regenerate framework, and planning in particular. I think we could all benefit from hearing how others are responding to this crisis — look for my invitation.
Update: COVID-related loans
Talking with one of my BKM Sowan Horan partners yesterday, the spirit of the CARES Act has seems to have been lost in its implementation. The SBA says they’re out of funds — my bet is that there will be more, and if you have not been approved for a PPP loan I would continue to work on getting that done. Fintech companies like PayPal, Intuit and Square are now prepared to make PPP loans; they may be better prepared to deal with a large volume of smaller loan applications. If you have banking options, a smaller bank might be worth investigating.